| Mon 28 Feb 2011, 16:00 | | MSP - MAS Plc - Unaudited Condensed Interim Financial Statements Nine months |
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MSP
MSP
MSP - MAS Plc - Unaudited Condensed Interim Financial Statements Nine months
from 1 March 2010 to 30 November 2010
MAS PLC
Previously Mergon Property Holdings Limited
(Incorporated in the Isle of Man)
(Registration number 2893V)
Share code: MSP
ISIN: IM00B4LFGH00
("MAS plc" or "the Company")
Unaudited Condensed Interim Financial Statements
Nine months from 1 March 2010 to 30 November 2010
MAS plc REPORTS IN-LINE PERFORMANCE FOR THE NINE MONTHS ENDED 30 NOVEMBER
2010
Highlights:
* European property market continues to recover, but remains with a large
debt re-finance overhang
* MAS plc portfolio continues to deliver solid income in-line with
expectation
* Interim dividend of 2.05 cents per share relating to the first half
results successfully paid
* Golden Cross student residential development progress is on schedule for
completion and occupation in early September 2011
* Strong recovery in long-term European interest rates have resulted in non-
cash gains on hedging instruments compared with the end of the 1st half of
the year
* Capital raise to take place in May 2011
* Strong pipeline of investment opportunities
Ron Spencer, Chairman of MAS plc, commented:
The payment of the maiden interim dividend, at a healthy 2.05% for the first
6 months of the year, is evidence of the Company`s solid progress. However,
direct property investment is not a process that leads to instant
gratification. A high quality investment portfolio requires careful assembly
over a period of time, with emphasis on the acquisition of quality assets at
good prices for security of strong income and capital values in the long
term. In this regard, the portfolio has taken shape very well, with the Aldi
portfolio and DPD property now generating income, and the Golden Cross
student residential development being on schedule and expected to contribute
from September 2011. The Investment Adviser continues to deliver exciting
propositions, and the Company is now ready to raise further investment
capital to take advantage of these continuing opportunities in the market.
Directors` and Investment Advisers` Report
The Company`s objective is to provide investors with a high dividend
yielding direct exposure to European commercial property. The current focus
of investment is in the jurisdictions of Germany, Switzerland and the United
Kingdom.
In August 2009 the Company listed on the Euro-MTF exchange in Luxembourg and
the Alt-X exchange in Johannesburg. On listing EURO 9,309,821 was raised
followed by a second fund raising in late March/early April 2010, during
which further capital was raised, bringing the capital of the Company to
EURO 19,398,947.
Market update
Germany:
Towards the end of the year readiness for deals burgeoned amongst both
buyers and sellers in the German commercial property market. In the fourth
quarter of 2010 properties with a value of EURO 6.015bn changed hands. This,
the highest quarterly result of the year, confirmed the market recovery was
underway. In a few cases the continued tendency to concentrate on core
properties led to a further decline in initial yields. The total volume of
transactions for 2010 reached EURO 18.815bn, a rise of more than 80% set
against 2009, and only just 5% short of 2008. For 2011 we expect the market
to consolidate and the volume of transactions to reach a level of between
EURO 20 - 24bn. Economically, the weak euro will be a significant benefit to
the robust German export market.
Switzerland:
Global economic issues continue to set the tone. Whilst the Swiss economy
has continued its robust recovery from the depths of 2008/2009 - eager to
return to peak fitness as if nothing had happened - internal economic
developments continue to make a sustained improvement difficult. In today`s
volatile world rife with sovereign debt concerns, economic austerity and
rescue packages, stability and continuity come at a price. The resulting
substantial appreciation of the "safe haven" Swiss Franc is likely to subdue
growth in this export dependent economy for some time to come. However, just
in case observers need to be reminded, moderate economic optimism
nevertheless remains with overall growth expectations for the next two
quarters to be at between 1.5% to 2.0%.
The last quarter of 2010 witnessed weakening performance in the various
Swiss commercial real estate markets. The indications are that the
underlying strength of rental levels since mid 2009 has started to wane with
asking price indices for both retail and office rents in the main centres
falling over the last two quarters of 2010. In contrast, prime rents and
prime yields continue to remain largely stable, thereby reflecting the
market`s appetite for lower risk "AAA" properties and concomitant widening
of yield spreads between "better" and "poorer" investment opportunities.
UK:
At the start of 2011 all sectors in the UK saw prime yields hold at the end
of 2010 levels. What did change was the increased number of sectors
identified as likely to experience further yield compression. The increasing
appetite from investors willing to look beyond London offices saw high
street retail, shopping centres and retail warehouses added to leisure parks
and industrial multi-lets as sectors expected to see downward pressure on
yields over the short term. However, the recent release of preliminary Q4
GDP figures, which saw output fall by 0.5%, against the backdrop of rising
inflation, will no doubt generate some investor uncertainty. As a result the
Directors anticipate a `wait and see` attitude by investors, with
acquisitions likely to be put on hold over the first few months of this
year. Despite a potential slowdown in activity, the restricted supply of
prime assets across all sectors will, at the very least, keep yields at
current levels.
On a positive note, the bi-annual survey carried out by B finance found that
pension funds expect to increase their allocations to property by an average
of 22% over the coming 6 months and 33% over the next 3 years. In contrast
there has been a marked shift away from bonds. Institutional investors are
clearly looking for diversification and high return opportunities over the
medium to longer term and as a result are again looking seriously at
property and other `alternative` assets. This interest from pension funds
will likely maintain competition for better quality property investment
opportunities, maintaining prime yields.
Performance & Dividend
The Company paid its maiden interim dividend of 2.05 euro cents per share,
with a cash or scrip alternative, after the first half year results. This
was a satisfying result as Distributable Core Income began to be generated
from the acquisitions of the Aldi portfolio in Germany and the DPD Swiss
headquarters near Zurich. Distributable Core Income, the effective net
income from the underlying properties, is one of the key performance metrics
and a focus of the Company. The 3rd quarter continued in a similar vein to
the previous two quarters and the Company looks set to deliver very pleasing
full year results, although some currency exchange gains that had been
earned in the first half of the year reversed back to a neutral position in
the 3rd quarter.
In addition to the properties that are already generating income, the
completion of the Golden Cross student residential development in
Birmingham, UK, is expected in September 2011 in time for the new intake of
students. This additional income will further add to the Distributable Core
Income from that date.
Mezzanine loan opportunities for unspent funds remain available to us, but
the Directors only consider such investments where there is desirable
security.
Property investments
The property portfolio has performed well and in-line with expectations. Due
to the secure nature of the single tenant lease agreements, vacancy rates
are not applicable and the tenants continue to trade well.
Properties are valued annually by approved independent third party valuers.
In the 9-month interim accounts, the Directors remain comfortable with the
valuations of the properties at the end of the previous financial year, in
which the DPD property was valued at CHF 21.6M by Wuest and Partner and the
Aldi portfolio at EUR 10M by DTZ. Full year revaluations will again be
performed by independent third party valuers at the end of 28 February 2011.
Interest rate hedges
The economic benefit of the interest rate hedges is substantial, as highly
visible positive yield spreads are locked in over the life of the
investment. The yield spread is effectively the difference between what is
earned through rentals, less the fixed or capped interest expense on debt
funding. However, it is highlighted that extremely long leases, and hence
very long interest rate hedges, result in unusually substantial non-cash
mark-to-market valuations for the swap. The Directors emphasise and remain
focused on the cash generation within the business, and not the volatility
arising from the revaluation of long-term financial hedging instruments.
Nonetheless, it is worth noting that the long-term government bond rates
have recovered strongly in Europe since the lows seen at the half year mark.
To put this in perspective, the 20-year Euro swap rate has rallied from 2.6%
at the end of August to 3.4% at the end of November, in response to renewed
worries of inflation, emanating in part from another round of quantitative
easing by major economies. Over the last quarter, the non-cash flow income
statement effect of this was a gain of EURO 633,000. The Directors believe
that it is correct to manage interest rate exposure and will continue to do
so with new investments as they are made.
Further capital raising
The Company is undertaking a capital raise in early May 2011. This will
continue to enhance the operational leverage of the business,
diversification of the portfolio, income returns to shareholders and
liquidity of the traded shares. The Company is in the process of building
initial capital commitments for this raise and has a strong and attractive
investment pipeline. The Directors anticipate more good news in this regard
shortly.
Prospects
The business continues to develop in line with expectation and the Directors
are pleased with the developments to date and remain confident about the
future prospects.
Ron Spencer Date 28 February 2011
Chairman
These financial statements were approved by the Board of Directors on 28
February 2011 and signed on their behalf by: Ron Spencer
Further information
Helen Cullen, Company Secretary +44 1624 625000
Lukas Nakos, Managing Director +44 1624 653707
Malcolm Levy, Financial Director +44 1624 653706
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED 30 NOVEMBER 2010
Unaudited Unaudited Audited
Nine Nine
months months Year
ended ended ended
30-Nov-10 30-Nov-09 28-Feb-
10
Notes Euro Euro Euro
Income
Rent received 2 1,270,320 - 290,999
Expenses
Investment adviser fees (172,783) (36,836) (71,748)
Operating expenses (506,885) (575,006) (825,676)
Exchange differences (2,462) 2,629 82,123
Fair value adjustments 3 (742,859) (487,594) (2,114,785)
Sundry income 212,242 - -
Results from operating
activities 57,573 (1,096,808) (2,639,087)
Net interest expense (516,384) (45,443) (48,863)
(Loss)/profit before
taxation (458,811) (1,142,250) (2,687,950)
Taxation (75,000) - -
Net (loss)/profit after
taxation (533,811) (1,142,250) (2,687,950)
Other comprehensive income
Currency translation
adjustment 685,918 - -
Total comprehensive
income for the year 152,107 (1,142,250) (2,687,950)
Earnings per share (cents
per share) (3.0) (39.7)
(78.6)
Weighted average number
of outstanding shares 18,027,897 2,878,090 3,420,493
Distributable core income 527,226
The Directors consider that all results derive from continuing activities.
The notes set out below form part of these consolidated interim financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 NOVEMBER 2010
Unaudited Unaudited Audited
Nine Nine
months months Year
ended ended ended
30-Nov-10 30-Nov-09 28-Feb-10
Notes Euro Euro Euro
Non-current assets
Investment Property 4 27,934,122 4,783,368 24,773,271
Current assets
Short term loans 3,275,128 - -
Trade and other
receivables 125,628 42,285 122,499
Cash and cash
equivalents 5,782,371 4,092,150 1,528,306
9,183,127 4,134,435 1,650,805
Current liabilities
(amounts falling
within one year)
Short term loans - - (1,384,500)
Trade and other
payables (615,529) (261,300) (429,010)
(615,529) (261,300) (1,813,510)
Net current assets /
(liabilities) 8,567,598 3,873,134 (162,705)
Non Current Liabilities
Long term loans (18,116,578) - (17,261,161)
Financial instruments 5 (1,520,701) (487,594) (726,197)
Net Assets 16,864,441 8,168,908 6,623,208
Capital and reserves
Share capital 6 19,398,947 9,309,821 9,309,821
Retained (loss) /
profit (3,220,424) (1,140,913) (2,686,613)
Foreign currency
translation reserve 685,918 - -
Shareholder equity 16,864,441 8,168,908 6,623,208
Net asset value (cents
per share) 86.9 87.7 71.1
The Directors consider that all results derive from continuing activities.
The notes set out below form part of these consolidated interim financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED 30 NOVEMBER 2010
Unaudited Unaudited Audited
Nine Nine
months months Year
ended ended ended
30-Nov-10 30-Nov-09 28-Feb-10
OPERATING ACTIVITIES Euro Euro Euro
(Loss) /profit before taxation (533,811) (1,142,250) (2,687,950)
Finance costs 516,384 45,443 48,863
Unrealised currency translation
differences (732,623) (2,629) -
Fair value adjustments 742,859 487,594 2,114,785
(7,191) (611,842) (524,302)
Changes in net current position 183,390 96,602 184,098
Net interest expense (516,384) (45,443) (48,863)
Cash generated from operating
activities (340,185) (560,683) (389,066)
INVESTING ACTIVITIES
Investment properties (1,356,992) (2,641,836) (24,020,327)
(Repayment)/proceeds from
investment loans (3,234,118) - -
Cash generated from investing
activities (4,591,110) (2,641,836) (24,020,327)
FINANCING ACTIVITIES
Issuance of share capital 8,704,626 7,270,748 9,309,721
(Repayment)/proceeds from
non-current loan Facilities (205,184) - 16,606,688
Cash generated from financing
activities 8,499,442 7,270,748 25,916,409
NET INCREASE/(DECREASE IN CASH AND
EQUIVALENTS 3,568,147 4,068,230 1,507,016
Cash and equivalents at the
beginning of the period 1,528,306 21,291 21,291
Translation effect on revaluation
of foreign operations 685,918 2,629 -
CASH AND EQUIVALENTS AT PERIOD END5,782,371 4,092,150 1,528,307
The notes set out below form part of these consolidated interim financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED 30 NOVEMBER 2010
30 Nov-10 30 Nov-10 30 Nov-10 30 Nov-10
Currency
Retained Translation
Share Capital Income Adjustments Total
Euro Euro Euro Euro
Opening balance
at 28 February
2009 100 1,337 - 1,437
Issue of shares 9,309,721 - - 9,309,721
Profit for
period to 28
February 2010 - (2,687,950) - (2,687,950)
Closing balance
as at 28
February 2010
(Audited) 9,309,821 (2,686,613) - 6,623,208
Issue of shares 10,089,126 - - 10,089,126
Loss for period
to 30 November
2010 - (533,811) - (533,811)
Foreign currency
translation
reserve - - 685,918 685,918
Closing balance
as at 30
November 2010
(Unaudited) 19,398,947 (3,220,424) 685,918 16,864,441
The notes set out below form part of these consolidated interim financial
statements.
Notes to the interim consolidated financial statements
1. Significant accounting policies
This condensed consolidated interim financial information for the nine
months ended 30 November 2010 has been prepared in accordance with IAS 34,
`Interim Financial Reporting`. The condensed consolidated interim financial
information should be read in conjunction with the annual financial
statements for the year ended 28 February 2010, which have been prepared in
accordance with International Financial Reporting Standards (IFRS).
Basis of accounting
The group`s results for the nine months to 30 November 2010 have been
prepared on a basis consistent with the group`s accounting policies
published in the financial statements for the year ended 28 February 2010.
2. Rentals received
The rentals received consist of EURO 721,239 received from DPD and EURO
549,081 received from the Aldi Portfolio.
3. Fair value adjustments
Fair value adjustments relate to:
Unaudited Unaudited Audited
Nine Nine
Months Months Year
ended ended ended
30-Nov-10 30-Nov-09 28-Feb-10
Euro Euro Euro
DPD Property
Fair value adjustment - DPD property - - 137,308
Fair value adjustment - Credit Suisse
interest rate swap (358,445) (152,148) (276,667)
Aldi Portfolio (358,445) (152,148) (139,359)
Fair value adjustment - Aldi portfolio - - (1,525,896)
Fair value adjustment - Sparkasse
interest rate swap/cap (384,414) (335,446) (449,530)
(384,414) (335,446) (1,975,426)
Total (742,859) (487,594) (2,114,785)
4. Investment property
Investment property is carried at the valuations per that last audited
financial statements, being 28 February 2010. Those valuations were
performed by stock exchange approved independent professional valuers, and,
in terms of the policy, the properties will again be revalued independently
at the end of the current financial year. The investment property consists
of the following: the Aldi portfolio; the DPD property; and the Golden Cross
student residential development that is carried at cost, but will be
revalued under the fair value model for Investment Property under
Construction at year-end.
5. Financial instruments
Reconciliation of financial instruments
Aldi DPD Total
Euro Euro Euro
Year ended 28 February 2010 (Audited)
Fair valuation of hedging instruments (449,530) (276,667) (726,197)
Nine months ended 30 November 2010
(Unaudited)
Fair valuation of hedging instruments (384,414) (358,445) (742,859)
Exchange difference - (51,645) (51,645)
(833,944) (686,757) (1,520,701)
6. Share capital
During the period under review, the Company issued 10,089,126 ordinary
shares of no par value at EURO1 each (period ended 28 February 2010:
9,309,821 shares of no par value at EURO1 each). The current issued share
capital of the Company is 19,398,947ordinary shares of no par value. The
Company does not have authorised share capital as it is registered under the
Companies Act 2006 of the Isle of Man.
Unaudited Unaudited Audited
Nine months ended Nine months ended Year ended
30-Nov-10 30-Nov-09 28-Feb-10
Number Euro Number Euro Number Euro
Share
Capital 19,398,947 19,398,947 9,309,271 9,309,271 9,309,821 9,309,821
Sponsor
PSG Capital (Pty) Limited
Date: 28/02/2011 16:00:11 Produced by the JSE SENS Department.
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